The Indiana Supreme Court recently held that a company properly classified a driver as an independent contractor, not an employee, for unemployment insurance tax purposes. The company connected drivers with vehicle manufacturers that needed large vehicles driven to their customers or dealerships. When a former driver filed a claim for state UI benefits, the Indiana Department of Workforce Development (DWD) classified the driver as an “employee” and an ALJ agreed. The Court of Appeals reversed and the DWD appealed.
Indiana employers pay UI tax on employee wages, but not independent contractor payments. Applying Indiana’s three-part worker classification test, the court found the company rebutted the statutory presumption that all workers are “employees” because the driver: (1) was free from the direction and control of the company, both under contract and in fact; (2) performed a “drive-away” service outside the usual course of the company’s business; and (3) independently engaged in an established trade or business of the same nature as the drive-away service performed for the company. Notably, under the “usual course of business” prong, the court rejected arguments by the DWD that placed undue reliance on the company’s advertising or regulatory licensing. Instead, the court analyzed the company’s actual business activity of “match[ing] drivers with customers who need large vehicles driven to them.” Q.D.-A., Inc. v. Ind. Dep’t of Workforce Dev., 114 N.E. 3d 840 (Ind. 2019).